This recent report suggests steady saving for retirement is not important

The thrust of a recent Investment Company Institute study, “Who Participates in Retirement Plans, 2016,” seems to be “Don’t worry if young people and others aren’t saving for retirement. Retirement saving isn’t high on their agenda. They will start saving when they feel they need to.”

The ICI report starts with the basic question of how many workers are participating in a retirement plan. The report turns to Statistics of Income tax data, which show 57% of tax filers ages 55 to 64 were actively participating in a retirement plan in 2016. The implication is that we should be happy with 57%, because this number includes older and richer people for whom retirement saving is important and Social Security produces very high benefits for the rest.

Finally, participation rates are not improving: according to the SOI data the rate was 56% in 2008 and 57% in 2016. So, participation rates are simply not as high as ICI reports, and they are not getting better over time. Two steps. First, select a really low measure of preretirement earnings. Among the options are average earnings in the last five years, average wage-indexed lifetime earnings as used by Social Security, and average inflation-indexed lifetime earnings. Average inflation-indexed lifetime earnings produces the lowest number and is always the measure of choice for those saying everything is fine.

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